Policy | Research | Media

Give it to the people

For those of us who remember what it was like to fly with the national carrier in the 1990s, we recall the painful hours waiting in the plane on the runway for it to take off, the complex and tiresome ticketing process, and the unique elbowing techniques one would employ to get to the front of the check-in booth for a flight that was usually delayed. Thankfully those days are long gone. Today Middle East Airlines (MEA) has once again become a profitable and sound business representing our nation. Last year, when airlines were buckling under the pressure of the downturn, it brought in a record profit of $105 million, increased its passengers by 14.61 percent, and increased its revenue per passenger by 11.8 percent.

It wasn’t always this way. For 26 years until 2002 the airline was posting an annual loss. Ultimately this proved to be a blessing in disguise because when the airline became too much of a burden, and/or our government realized they would never ‘milk the cow,’ a political decision was finally taken to corporatize and downsize the company whilst retaining public ownership through the central bank.

The process was by no means painless and was politically charged from the get-go: around quarter of the company was chopped, routes were cut, many people lost their jobs, and we had to come to terms with the fact that our airline was not what it once was. Be that as it may, it’s better to grow into a profitable business than to whither away slowly in the red.

But to be truly Lebanese you need issues, and MEA has more than a few. Besides the one-day strike in April that cost the airline some $800,000 according to its chairman Mohamad el-Hout, the airline’s successful downsizing under his patronage left a rather dubious trail in its wake. Already this year the parliamentary opposition has lambasted Hout, for, amongst other things, appointing his relatives, friends, as well as members and MPs of the Prime Minister’s party to various positions at the carrier and turning the airline into “family institution first and an institution for the Future Movement second,” according to one opposition paper. In response, Hout argued that the MPs were technically qualified to hold their position and denied charges of nepotism. “I don’t see anything wrong if some of these staff carry the Hout family name,” he was quoted as saying. What the chairman ostensibly doesn’t see is that such statements and appointment do little to ally the fear that MEA is the ‘property’ of Lebanon’s Sunni’s, whether the accusations hold water or not.

In Lebanon once the sectarian ball gets rolling, there is little chance of stopping it. To avoid such a scenario, what should be done is simple: take action that draws MEA away from the sectarian government back to the people of Lebanon. In business terms, that means making good on a promise to offer the people a stake in the company through a public listing. The decision is the central bank’s to make and its governor, Riad Salameh, has already said that he plans to raise $250 million through the sale of a 25 percent stake. What he also told me after the cabinet was formed in November was that he is waiting for “moral approval from the government.”

That approval has not been forthcoming, and neither has the promise of allowing other players to participate in the market once MEA’s monopoly on domestic traffic is up 2012. Indeed the current transport minister is seeking to extend it. But this market distortion makes little sense considering that our “Open Skies” policy allows foreign airlines to fly in and out of the country without restrictions while local airlines cannot. Moreover, Hout expects profits to dive 40 percent this year as a result of increased competition from foreign airlines.

Before that occurs and investment looks less attractive, it would seem logical to start pulling our national carrier away from narrow political and sectarian interests and, eventually, bring it fully into hands it belongs in—those of the people. What better time than now, when our economy is growing and investment is on the rise? If we start with our airline, we may, one day, finish with our country.

UPDATE: According to Bloomberg, on September 7 2010 Riad Salameh, Lebanon’s Central Bank Governor, announced that he was delaying the listing of MEA’s shares because of “unfavorable market conditions” in Arab markets and (for some odd reason) the greek debt crisis. Given that the shares were meant to be listed on the Beirut Stock Exchange, which performs independently of Arab bourses and is so small that it needs large institutional listing, this should be seen as a sure-shot sign that MEA’s patrons have no intention of allowing the people to participate in the ownership of their airline. No surprise there.